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BusinessExplainerPast Article

How a Small Firm Meets a Rate

A Treasury yield is not the rate on the line of credit. It is the public number the bank can see.

By Diego Marro, Small Business Correspondent

New York1 min read

Storm clouds gather over a dense cityscape
Storm clouds gather over a dense cityscapePhoto by Nikolai Kolosov on Unsplash

A bakery does not borrow at the ten-year Treasury yield. It borrows at whatever a bank will quote, if the bank will quote, on the owner's credit and the shop's cash flow. The Treasury yield is the rate the government pays. It sits underneath other rates as a reference, not as an offer.

When that reference moves, the conversation with the bank moves later, and not always by the same amount. A line of credit priced as a spread over a short-term benchmark will notice a policy-rate change faster than a fixed-rate equipment loan that was signed last spring.

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